Competition drives mortgage rates down

October saw mortgage rates continue to fall as lenders competed to entice homeowners to remortgage, it has been revealed.

The Bank of England figures have shown that the average cost of a tracker loan hit a record low of 3.5% after it fell for the third consecutive month.

During October interest rates for people with a two-year fixed-rate deal on a 25% deposit dropped by 3.72%, which is the second lowest level since records began in 1995. Meanwhile, the average cost of a five-year fixed-rate mortgage fell by 0.19% to 4.85%, which is its lowest level for half a decade.

But despite the declining mortgage rates, the swap rate - which fixed-rate loans are partially based - actually increased over the course of the month.

Instead, the fall is thought to have been driven by increased competition among lenders, who are trying to tempt homeowners to remortgage off low standard variable rates (SVRs).

A number of lenders have launched deals in recent weeks that are specifically aimed at people who are remortgaging.

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